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“Bought Before the Buzz” Stock Market (and Sentiment Results)…

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“Bought Before the Buzz” Stock Market (and Sentiment Results)…

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S&P 500 Bullish Percent

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Nasdaq Stocks Above 200 Day MA

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On Tuesday, I joined Stuart Varney on Fox Business’ Varney & Co. to discuss Iran, markets, the economy, outlook, earnings, banks, and a lot more. Thanks to Stuart and Maggie Edwards for having me on:

On Tuesday, I joined Joel Elconin on the Stock Trader Network’s “PreMarket Prep” show to discuss markets, the economy, outlook, and the latest developments. Thanks to Joel and Zoltan Suranyi for having me on:

Bank of America Fund Manager Survey Update

On Tuesday, we put out a summary of the monthly Bank of America “Global Fund Manager Survey.” This month they surveyed 193 institutional managers with ~$563B AUM:

April 2026 Bank of America Global Fund Manager Survey Results (Summary)

Here were the 5 key points:

1) Fund manager sentiment, based on cash levels, equity allocations, and global growth expectations, fell from 5.6 last month to 3.7 in April, the most bearish reading since June 2025 (keep in mind, three-quarters of managers responded before the ceasefire announcement on April 8th). While that’s still a long way from the true capitulation levels seen in recent washouts (April 2025 “tariff tantrum” at 1.7, October 2023 SPX low at 1.6, July 2022 post-SVB at 0.3), zoom out and the playbook hasn’t changed: these “elevator down” collapses in sentiment have consistently proven to be buying opportunities served on a silver platter, a chance to add exposure to GOOD companies at EVEN BETTER prices. This time has once again proven to be no different.

2) Global equity allocation dropped from a net 37% overweight to just 13% overweight in April, the least overweight positioning since July 2025. While managers are certainly lightening up, they haven’t thrown in the towel yet. For context, prior recent lows saw managers go outright underweight, hitting a net 17% underweight in April 2025 and a net 52% underweight in September 2022.

3) The share of fund managers saying US equities are overvalued dropped to a net 64% in April, the lowest reading since February 2019. Something we continue to fall back on, and the reason we remain so constructive, is the earnings engine that keeps accelerating and powering equities higher. Full-year S&P 500 earnings growth estimates have been revised HIGHER since the beginning of the Iran War, now at 17.6% versus the prior 14.7%. The recent pullback has been driven entirely by multiple contraction (-18%), a rare setup alongside accelerating earnings growth and one that sets the table for the next leg higher.

4) Fund managers’ average cash levels held steady at 4.3% in April, the highest since May 2025 after the biggest single-month jump since COVID during the March survey. As we said from the beginning, this “event” started with a tweet and will end with a tweet, with the positive news and progress over the past few days catching positioning way offside and powering the V-shaped recovery seen since.

5) Global growth expectations have rolled over meaningfully, dropping from 7% last month to -36% in April, the lowest reading since August 2025. Once again, macro expectations and sentiment have diverged from US equity prices, with S&P 500 Y/Y performance still well in positive territory. Historically, these kinds of disconnects tend to be short-lived and consistently resolve higher, with markets proving far more resilient than the fear suggests.

Diageo Update

For newer readers, here’s a brief overview of the key drivers behind our thesis on Diageo, the world’s largest premium spirits company priced as if nobody will ever sip alcohol again as the market mistakes a cyclical hangover for permanent impairment:

Diageo’s 1H FY2026 earnings report was a textbook kitchen sink quarter, the kind you tend to see whenever a brand new CEO steps into a turnaround situation. The idea is simple: take all your medicine at once by releasing every piece of bad news, cutting the dividend, and lowering expectations to the floor so that everything moving forward becomes GOOD NEWS.

That’s exactly what Dave Lewis delivered in his first earnings call as CEO of the world’s largest spirits company. He cut the dividend to a floor of $0.50 per share (vs. $1.03 in FY2025) and reduced the payout ratio to just 30-50% going forward. Full-year guidance was lowered, with organic sales now projected to decline -2% to -3% (previously flat to slightly down) and operating profit growth revised to flat to low single digits (previously low to mid single digits).

Most importantly, Lewis laid out every pain point prior management had failed to properly address with zero sugar coating: persistent capacity constraints at Guinness that continue to leave demand unmet, customer service levels he described as “very poor” following years of underinvestment, and a neglected mass-market segment after more than a decade of pushing the premiumization angle at the expense of everything else.

The good news is that Lewis didn’t just lay out the problems. Just seven weeks into the role, he laid out three immediate priorities to tackle them head on: portfolio repositioning, rebuilding customer relationships, and redesigning the operating framework.

On portfolio repositioning, this is the same playbook Lewis ran at Tesco: cut prices selectively to reposition brands, claw back share, and offset any margin dilution with volume gains. It’s no secret that Diageo’s portfolio skews heavily toward the premium end, especially in tequila where 70% of units sell north of $45 compared to just 35% for the broader market. That strategy has left flagship brands like Casamigos and Don Julio essentially competing with each other at the very top while the mass market goes unserved. Lewis sees selective repositioning as not only an opportunity to build a more resilient portfolio less dependent on the economic cycle, but to add incremental business rather than cannibalize what is already there. For those concerned about near-term margin dilution as a result, as Lewis put it: “you don’t take percentages to the bank, you take cash to the bank.”

On customer relationships, Lewis was very clear: on-trade capability dismantled during COVID has been slow and patchy in its rebuild, and off-trade systems are not fit for purpose, with Diageo still entering 65% of its customer orders manually. In his eyes, that is an opportunity to shift from growing through customers to growing with customers by helping them build their categories and gaining disproportionately from that growth.

On the operating framework, this is an area where we suspected there’s plenty of low-hanging fruit. Lewis, who earned the nickname “Drastic Dave” for his cost cuts during his Unilever days, came to the same conclusion. Perhaps the most telling example is the fact that Diageo is paying 10x more to run payroll for ~30,000 employees than Tesco did despite having 15x the headcount. So while the Accelerate cost savings program is already running ahead of schedule, with ~50% of the $625M in total savings now expected in FY2026 and ~40% of that already delivered in the first half, expect Lewis to kick that into an even higher gear.

Complementing these near-term priorities, the first domino of the long-rumored executive overhaul has fallen, with John O’Keeffe named as the new North America President and CEO, stepping into the company’s biggest geographical pain point.

Lewis is clearly wasting no time ripping off the band-aid and making significant changes before he’s even found the coffee machine, with the full turnaround plan expected to be laid out at a capital markets day in calendar Q3.

Kitchen sink quarter aside, it’s also worth putting this “disaster” into context. Revenues are down 2.8% organically (fundamentals). The stock is down 60% from its 2022 highs (price). This is a perfect example of the short-term voting machine versus the long-term weighing machine playing out in real time.

Right now, the voting machine has given up on the entire sector, pricing Diageo and its peers as if nobody will ever sip alcohol again. That dislocation has left the highest-quality name in global spirits trading at ~12x forward earnings, the cheapest level going back to the GFC and well below its 20-year average of ~20x. The market continues to mistake a cyclical hangover for permanent impairment, and that’s an opportunity we are more than comfortable leaning into.

The first half under Lewis was never going to be the major inflection point for Diageo. But give a proven turnaround operator a few years to reset the foundation and clean up operations, and what you will find on the other side is the same high-quality compounder Diageo has always been, not the terminal patient the stock price currently suggests. In the meantime, free cash flow continues to recover and remains on track for ~$3B this year (+9% Y/Y), giving management the flexibility and a long runway to get there.

Q2 Earnings Breakdown

10 Key Points

1) Diageo reported 1H net sales of $10.46B (-4% Y/Y), with organic net sales down -2.8%, missing consensus of -2.0%. The organic decline was driven by volume down -0.9% and negative price/mix of -1.9%. Three of five regions grew organically, with Europe +2.7%, Africa +10.9%, and Latin America & Caribbean +4.5%, but that was more than offset by North America at -6.8% (Diageo’s #1 market at 36% of sales) and Asia Pacific at -11.1%. The U.S. was the primary drag, with organic spirits down -9.3% as tequila sales fell -23.1% on continued category softness and down-trading, while Greater China fell -42.3% on government-driven Chinese white spirits headwinds.

2) Organic operating profit declined -2.8%, with margins broadly flat (+1 bps) at 31.1%, as adverse market mix and tariff costs were offset by lower marketing spend driven by Accelerate efficiencies. Looking ahead, management warned of some near-term margin pressure as the focus shifts toward the neglected mass-market portfolio with selective price repositioning on a brand-by-brand basis. This is the same playbook Lewis ran at Tesco: narrow price gaps to win back share, with the volume response and quantum of gross profit dollars more than offsetting the short-term dilution to percentage profitability.

3) The Accelerate cost savings program continues to deliver, with ~50% of the $625M total savings now expected in FY26, up from the ~40% assumption last quarter, and ~40% of that already realized in 1H alone. The majority of savings came from supply chain agility, cost efficiencies, and A&P optimization, with marketing spend down ~10% Y/Y, providing a $178M benefit to operating profit. Management continues to find low-hanging fruit across the organization, with new CEO Dave Lewis highlighting the fact that Diageo is paying 10x more to run payroll for ~30,000 employees than Tesco did despite having 15x the headcount, and that ~65% of customer orders are still being entered manually.

4) Guinness remains the standout across the portfolio, posting +10.9% organic sales growth in 1H and gaining share every single week of the half in North America. The Diageo Beer Company USA division saw net sales +7.3%, driven by double-digit Guinness growth, with the brand now +15% in North America and the fastest-growing beer brand in the region. Despite strong double-digit growth over the last five years and high historical ROIC, the business remains highly geographically constrained, with eight markets representing 85%+ of sales. Management is committed to increasing investment in capacity expansion to unlock new markets and scale Guinness 0.0, noting that current capacity will not be sufficient for the next 2-3 years given the growth trajectory and significant untapped opportunity ahead.

5) The board made the decision to cut the FY26 dividend to a floor of $0.50 per share, compared to $1.03 in FY25, with an interim dividend of $0.20 declared. Going forward, Diageo is moving to a 30-50% payout policy and remains committed to growing shareholder distributions over time. The savings will be used to fund reinvestment in restoring competitiveness in North America and expanding Guinness capacity. Given the need for deleveraging and reinvestment required to fund the turnaround, the cut doesn’t come as a major surprise and is exactly the type of decision we want to see from a new CEO focused on long-term value creation.

6) 1H operating cash flow decreased $202M to $2.14B, while free cash flow came in at $1.53B, down $164M Y/Y due to adverse working capital movements. Management reiterated FY26 FCF guidance of ~$3.0B (+9% Y/Y from $2.75B in FY25), and their commitment to strong cash generation remains unchanged.

7) While only seven weeks into the job, new CEO Dave Lewis laid out three clear near-term priorities during his inaugural earnings call: competitive category strategies with relevant brands, reinvigorating customer relationships, and redesigning Diageo’s operating framework. He called out Diageo’s customer service as “very poor,” noted the company is significantly underrepresented in the mass market, and indicated he would explore price repositioning, new proposition spaces, and RTDs to broaden the portfolio beyond the prior premiumization-only focus. Management expects to provide the board with a full updated strategy proposal in calendar Q2, with a capital markets day planned for mid-Q3.

8) Net debt stood at $21.7B at the end of 1H, down $182M, with leverage flat Y/Y at 3.4x. Management reiterated a commitment to deleveraging and reaching the target range of 2.5x-3.0x by fiscal 2028, but remains more focused on operational improvement than asset disposals to reach the target. Management was clear they are unwilling to sell brands below fair value despite recent market speculation. That said, with a portfolio of 200+ brands, disposals remain possible where appropriate, as evidenced by the recent $2.3B EABL sale and $1.8B sale of the Indian cricket franchise Royal Challengers Bengaluru.

9) 1H capex came in at ~$590M, down ~$40M Y/Y, driven by continued discipline around project-level investments. Management continues to expect full-year capex to reach the low end of the $1.2-1.3B range, down from ~$1.5B in FY25, with spend largely focused on Guinness production and capacity expansion, supply agility, and digital infrastructure, all areas that directly support the turnaround thesis and long-term competitive positioning.

10) Management lowered FY26 guidance, now expecting organic sales of -2% to -3% (prior: flat to slightly down) and operating profit growth of flat to low single digits (prior: low to mid single digits). The revision reflects further weakness in the U.S., which was previously expected to remain in line with FY25 market conditions, the ongoing impact of Chinese white spirits headwinds, and tariff-related pressure.

Earnings Call Highlights

Morningstar Analyst Note

Hormel Update

For newer readers, here’s a brief overview of the key drivers behind our thesis on Hormel, an out-of-favor staples compounder and dividend aristocrat with a margin inflection ahead and the secular protein megatrend behind it:

Q1 Earnings Breakdown

10 Key Points

1) Hormel delivered its fifth consecutive quarter of organic net sales growth at +2% Y/Y, though reported net sales of $3.03B (+1.3% Y/Y) came in slightly below consensus of $3.07B. Organic growth remains broad based, with Foodservice at +7%, International at +8%, and Retail the weak spot at -2%. Adjusted EPS of $0.34 came in $0.02 ahead of consensus expectations.

2) Adjusted operating income came in at $247M, with an adjusted operating margin of 8.2%, down from 8.5% last year, as commodity and freight capacity headwinds continued to pressure profitability. Beef remained a significant inflationary headwind across the industry, pork trim increased +12% Y/Y, and nut costs stayed elevated, though some relief was seen on pork bellies. In response to the sharp increase in input costs, Hormel implemented two rounds of pricing actions that are now fully in effect as of the start of Q2, with benefits expected to build throughout the year. Management expects commodity costs to ease somewhat in the back half of FY2026, which, alongside Transform and Modernize efficiency and productivity gains, is expected to help drive gross margin expansion for the full year.

3) The Retail segment (~61% of total sales) remained under pressure, posting a -2% decline in organic net sales to $1.85B driven by a -6% drop in volumes and pricing actions not yet fully implemented. Segment profit fell -19% Y/Y to $96.2M, bringing segment profit margins down to just 5.21%. The decline was driven by the strategic exit from non-core private-label snack nut items, higher raw material costs, and unexpected increases in logistics expenses. That said, Hormel’s total dollar consumption was +2% in the latest 13-week Circana data, with priority brands +3%, led by Jennie-O ground turkey (dollar consumption +15%), Planters, Applegate, Hormel Gatherings, and Mexican brands.

4) Foodservice continues to be the engine, posting its 10th consecutive quarter of organic net sales growth at +7% to $998.2M, with segment profit +13% Y/Y to $156.5M and segment profit margins of 15.68%. Growth was broad-based across channels, driven by premium prepared proteins and branded pepperoni, with brands like Austin Blues smoked meats, Hormel Fire Braised, and Hormel Natural Choice all delivering strong volume and net sales growth. Management views the differentiated Foodservice model as a key competitive advantage in what remains a challenging environment with traffic still under pressure.

5) The International segment delivered +8% organic net sales growth to $181.3M, with segment profit +10% Y/Y to $22.9M and segment profit margins of 12.64%. Growth was driven by Hormel’s multinational businesses and branded exports, led once again by SPAM luncheon meat, with profit strength supported by lower SG&A spend and continued growth in China.

6) Hormel’s dividend aristocrat status continues, with the company paying its 390th consecutive quarterly dividend and returning ~$160M to stockholders during the quarter (5.61% current annual yield). The dividend is supported by a strong balance sheet with $868M of cash on hand (+$197M sequentially) against $2.85B in long-term debt.

7) Hormel announced a definitive agreement to sell its whole-bird turkey business to Life-Science Innovations, a strategic move aimed at reducing exposure to volatile, commodity-driven businesses and sharpening the focus on its value-added protein portfolio. The business typically generates $200-275M in annual net sales with high volatility and low margins that are significantly dilutive to Retail segment profitability. The transaction is expected to close by the end of fiscal Q2 with a ~$50M net sales impact in FY2026 and a larger impact reflected in FY2027. Importantly, the sale does not affect value-added turkey products, and Hormel will continue to own and use the Jennie-O brand name.

8) Capital expenditures came in at $69M in the quarter (vs. $72M last year), with the largest projects in China and continued investments in data and technology. Full year FY2026 capex guidance remains at $260–290M, compared to $311M in the prior year.

9) Cash flow from operations came in at $349M, up +$26M from the prior quarter, as Hormel continues to deliver strong and consistent cash generation.

10) Management reiterated full year FY2026 guidance across the board: net sales of $12.2–12.5B, organic net sales growth of +1% to +4%, adjusted operating income of $1.06–1.12B (+4% to +10%), and adjusted diluted EPS of $1.43–1.51 (+4% to +10%). Management expects sequential improvement throughout the year, with Hormel well positioned to deliver against its long term targets of 2–3% annual organic sales growth and 5–7% operating income growth.

Earnings Call Highlights

Morningstar Analyst Note

General Market

The CNN “Fear and Greed Index” ticked up to 47 this week from 28 last week. You can learn how this indicator is calculated and how it works here: (Video Explanation)

The NAAIM (National Association of Active Investment Managers Index) (Video Explanation) rose to 69.38% equity exposure this week from last week’s 68.36%.

Our podcast|videocast will be out sometime today. We have a lot of great data to cover this week.  Each week, we have a segment called “Ask Me Anything (AMA)” where we answer questions sent in by our audience. If you have a question for this week’s episode, please send it in at the contact form here.

Congratulations to all of the new clients that came in intra-quarter (Q1) with larger sized accounts, and to those existing clients who upsized their contributions to their accounts.

Our Q1 opening is officially closed. Congratulations to all the new clients who joined during the opening.

Larger accounts $5-10M+ can access bespoke service anytime here.

Not a solicitation.

*Opinion, Not Advice. See Terms

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OUTLOOK:

SENTIMENT:

POSITIONING:

MOST CROWDED TRADES:

BIGGEST TAIL RISKS:

BANK OF AMERICA COMMENTARY:

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S&P Small Cap Advances

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The column under the date 4/13/2026 has a letter that represents the movement in 2026 earnings estimates since the most recent print (2/12/2026). “U” means 2026 estimates are UP in the last 60 days. “D” means 2026 estimates are DOWN in the last 60 days. “S” means 2026 estimates have remained the SAME in the last 60 days. The column entitled “1yr Target Est” is the Wall Street consensus 12 month price target for each stock.

What this table is telling us is that estimates are UP. More estimates went UP for 2026 in the past 60 days than came DOWN – the Up:Down ratio was 18:12.

The cumulative 2026 earnings power of these 30 stocks was revised DOWN by -0.50% in the past 60 days. 2027 estimates are UP +3.07%.

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The column under the date 4/13/2026 has a letter that represents the movement in 2026 earnings estimates since the most recent print (2/12/2026). “U” means 2026 estimates are UP in the last 60 days. “D” means 2026 estimates are DOWN in the last 60 days. “S” means 2026 estimates have remained the SAME in the last 60 days. The column entitled “1yr Target Est” is the Wall Street consensus 12 month price target for each stock.

What this table is telling us is that estimates are UP. More estimates went UP for 2026 in the past 60 days than came DOWN – the Up:Down ratio was 22:7. The rest remained the same.

The cumulative 2026 earnings power of these 30 stocks was revised UP by +7.76% in the past 60 days. 2027 estimates are UP +14.20%.

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Equity Put Call Ratio 10 DMA

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S&P 500 High Low Index

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“X Marks the Upcycle” Stock Market (and Sentiment Results)…

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Rydex Ratio – ARKTOS/OTC Funds

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Volatility index – CBOE Russell 2000

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NYSE Plurality Index

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On Monday, I joined Ash Webster on Fox Business’ Varney & Co. to discuss markets, the economy, outlook, Iran, and a lot more. Thanks to Stuart Varney, Ash, and Maggie Edwards for having me on:

QXO Update

For newer readers, here’s a quick overview of the key drivers behind our thesis on QXO, Brad Jacobs’ latest venture and one of our favorite arms dealer plays on a U.S. housing market recovery:

QXO’s fourth quarter results came with no surprises and landed right where expected, with preliminary figures released alongside the equity raise earlier this year. Net sales of $2.194B and adjusted EBITDA of $150.3M were essentially in line with pre-announced targets of $2.19B and ~$150M.

Near-term macro pressure on the U.S. housing market, driven by elevated rates and slowing activity, has weighed on shares of QXO, as one would expect for a leveraged housing recovery play. We continue to see this as largely noise. While QXO isn’t immune to market conditions, the real driver of the long-term thesis has nothing to do with any single quarter’s print and everything to do with disciplined M&A execution within the fragmented $800B building products distribution industry.

QXO is pursuing a large-scale consolidation strategy aimed at reaching $50B in annual revenue within a decade. With ~$10B on the board today, that leaves ~$40B in incremental revenue to be sourced through a mix of organic growth and, far more importantly, accretive M&A. The good news is that the longer housing stays under pressure, the more motivated and distressed sellers become, creating an attractive pipeline of high-quality assets available at trough valuations. That’s exactly where things stand today, with QXO leaning into the downturn and shopping from the industry clearance rack while the rest of the industry sits on the sidelines.

Against that backdrop, QXO closed its $2.25B acquisition of Kodiak Building Partners on April 1st, adding ~$2.4B of incremental revenue and marking the second major step in the roll-up strategy following last year’s $11B Beacon Roofing acquisition. QXO paid a reasonable 10.7x projected 2025 EBITDA of $211M, or ~0.95x sales, a multiple that falls to a highly attractive 7.3x once cost and revenue synergies are factored in.

Strategically, the Kodiak acquisition is a game changer. As a national distributor of lumber, engineered wood products, trusses, windows, doors, roofing, waterproofing, and other exterior products, Kodiak gives QXO a foot in the door to the lumber business, the first product in nearly every construction project. This entry point positions QXO as a true one-stop shop, covering almost every major building products category through a single, scaled national distribution platform. Post-close, QXO’s total addressable market expands more than threefold to $200B+, with greater exposure to structurally attractive markets such as Florida and Texas. These two states accounted for ~40% of Kodiak’s 2025 revenue and have consistently outpaced U.S. construction market growth over the past decade.

With the deal now closed, focus shifts to integration, realizing synergies, and the next acquisition. This is the same playbook Brad Jacobs has run throughout his entire career, spanning waste management, equipment rental, and logistics: consolidate fragmented, outdated industries using scale and technology, and create massive shareholder value in the process.

As the U.S. housing market emerges from what we continue to view as a cyclical trough, leveraged arms dealer plays like QXO stand to be among the cleanest beneficiaries. Until then, we’re more than happy to sit back and watch one of the greatest capital allocators of his generation go on a shopping spree at bottom-of-the-cycle prices.

Q4 Earnings Breakdown

GXO Update

For newer readers, here’s a quick overview of the key drivers behind our thesis on GXO Logistics, the world’s largest pure-play contract logistics provider and one of the cleanest ways to play the restocking cycle against a backdrop of strong secular tailwinds:

GXO closed out 2025 exactly the way you’d want a high-quality recovery story to finish the year. Revenue reached a record $13.18B (+12.5% Y/Y), organic growth accelerated to its highest rate in over two years at 3.9%, and adjusted EBITDA came in at a record $881M (+8.1% Y/Y). Every region contributed, with North America picking up the slack from softer volumes in Continental Europe and the UK, with 2025 also marking the third straight year of $1B+ in new contract wins. Most importantly, that momentum is carrying into 2026, with $774M of incremental new business revenue (+23% Y/Y) already secured before a single additional win is added to the board.

This was only Kelleher’s second full quarter in the seat, and we continue to be impressed by what we see. A 33-year supply chain veteran who ran DHL Supply Chain North America, he knows the U.S. opportunity better than anyone and is already moving aggressively to capture it, reallocating key resources and recruiting industry veteran Michael Jacobs to lead the region. With the U.S. representing less than a quarter of revenue ($3.2B) against a $250B+ TAM, the runway for expansion remains wide open and is still in the early innings.

Pulling the North America organic growth lever sits at the center of 2026 guidance, which calls for 4-5% organic growth, implying a ~60 bps acceleration at the midpoint. While some may have hoped for a more aggressive step toward the long-awaited return to high single-digit organic growth, this was Kelleher’s first time setting guidance, and he kept a lid on expectations with numbers we view as highly conservative. With $774M of incremental revenue already booked, implying ~6% gross growth, and historical retention running at 95%+, GXO is effectively already tracking at the top end of its guidance range before a single additional win is factored in. On top of that, management’s explicit assumption bakes in flat customer volumes for the full year, an assumption Kelleher himself called conservative and nothing more than prudence. Any volume recovery from here is pure upside.

We see several catalysts that could drive that upside. Customer inventories in the U.S. remain depleted and are likely to normalize. Reshoring activity continues to accelerate, supporting incremental demand for warehouse capacity. At the same time, the pipeline across life sciences, defense, and technology is expanding rapidly. Together, these tailwinds signal the early stages of a volume recovery and inventory upcycle that remains largely underappreciated by the market.

Even against today’s muted assumptions, GXO is set to deliver 20% EPS growth and record free cash flow of $333M (+28% Y/Y), with a low bar for upside surprises.

A defensive growth compounder with an embedded option in automation, AI, and robotics, growing earnings 20%+ while still trading at a meaningful discount to the broader market. This is a setup we’re happy to own any day of the week. The next major catalyst is the investor day later this year, where Kelleher is expected to lay out the long-term strategic roadmap, the path to a structurally higher margin base, and what a return to strong organic growth truly looks like.

The upcycle is just getting started.

Q4 Earnings Breakdown

10 Key Points

1) GXO posted record Q4 revenue of $3.51B (+7.9% Y/Y), beating consensus of $3.48B, with organic growth of +3.5% in the quarter. This brings full-year revenue to a record $13.18B (+12.5% Y/Y), of which 3.9% was organic, accelerating from FY24’s +2.5% and marking the highest organic growth rate in over two years. Q4 adjusted EPS came in at $0.87, beating consensus of $0.83 (-13% Y/Y), bringing full-year adjusted EPS to $2.51 (-10.4% Y/Y).

2) GXO won $248M in new contracts in Q4, bringing total annualized contract wins for FY25 to $1.1B and marking the third consecutive year of $1B+ wins. Of the $1.1B in total wins, 34% came from competitors, 21% from outsourcing, and 45% from new activity. Looking ahead, GXO has already secured $774M of expected incremental new business revenue for 2026, up 23% Y/Y versus the comparable position last year of $627M, implying ~6% gross growth before any additional wins.

3) The sales pipeline stood at $2.3B at the end of Q4 2025 and expanded to $2.5B by the time of the earnings call, with key verticals continuing to accelerate. Life sciences, a $34B TAM, has more than tripled over the past 12 months, even after delivering the largest win of the quarter. The technology vertical, a $28B TAM, has seen its pipeline more than double in the past six months, with GXO securing five new contracts in Q4, including multi-region wins with a leading hyperscaler for the first time. Aerospace and defense activity is accelerating across all regions, with GXO establishing a dedicated Defense Advisory Board in the U.S. to strengthen its business development efforts.

4) The Wincanton integration remains on track, having begun in Q3 with a realignment of the organizational structure and the integration of support functions, with procurement benefits expected in 2026 and beyond. Total realized integration benefits reached ~$15M by year-end 2025, with the full run-rate of $60M in cost synergies expected by the end of 2026. The combined GXO and Wincanton teams are already collaborating on new customer tenders, accelerating growth into target verticals. Management continues to expect meaningful revenue synergies over time, similar to those achieved through the Clipper acquisition, which drove the landmark NHS contract and GXO’s expansion into healthcare.

5) North America remains GXO’s largest and most immediate organic growth lever, representing less than a quarter of revenue today against a $250B contract logistics market with significant runway. Newly appointed North America leader Michael Jacobs, now three months into the role, is reallocating investments toward solution design, sales, and digital marketing to improve pipeline conversion and capitalize on the opportunity. Key growth drivers include reshoring activity, tariff-driven supply chain redesign, accelerating automation adoption, and above-GDP growth verticals such as aerospace and defense, technology, and life sciences. Going forward, M&A is expected to focus primarily on North America.

6) GXO is investing heavily in GXO IQ, its proprietary AI-powered warehouse operating system, which is already improving labor planning, inventory movement, forecasting, and workflow management across several of its largest sites. Early pilots in 2H 2025 showed measurable gains in proactive replenishment and slotting, with GXO IQ expected to scale to over 50 sites in 2026, covering ~4% of its 1,200 operations. GXO expects to have 20,000+ robots deployed globally by the end of 2026 and is piloting humanoid robots in live warehouse environments, with plans for several hundred pilots across all three regions. Management views physical AI, including humanoids and robotics, as a key driver of productivity gains and structurally higher margins over time.

7) Q4 adjusted EBITDA came in at $255M versus $251M in the prior-year period, with margins of 7.3% versus 7.7%. This brings full-year adjusted EBITDA to a record $881M, ahead of both consensus (~$878M) and the prior guidance midpoint of $875M, with full-year margins of 6.7% versus 7.0% in FY24. Management expects ~20 bps of margin expansion in 2026, which would be higher absent deliberate growth investments. The goal remains a structurally higher margin base at or above the peer group, supported by Wincanton synergies, reverse logistics growth, and continued automation adoption.

8) Q4 free cash flow came in at $163M versus $127M in the prior-year period, bringing full-year FCF to $259M versus $251M last year. FCF conversion was 29.4% versus 30.8% in FY24. Looking ahead to 2026, management guided FCF conversion of 30–40%, implying record FCF of ~$332.5M at the midpoint, a 28.4% increase Y/Y.

9) Net leverage improved to 2.5x, even after executing $200M in share buybacks during the first half of 2025 at an average price of $37.34. Cash stands at $854M, with total debt of $3.1B and total liquidity of $1.65B at quarter end. GXO completed its first European bond offering of EUR 500M, using proceeds to refinance upcoming maturities, and is targeting further deleveraging toward 2x by year end.

10) Management guided FY26 organic revenue growth of 4–5% (+60 bps acceleration at the midpoint versus FY25), adjusted EBITDA of $930–970M (+8% at midpoint), and adjusted diluted EPS of $2.85–$3.15 (+20% at midpoint), all in line with or ahead of consensus. Guidance assumes flat customer volumes in 2026, which management characterized as prudent and likely conservative given current inventory levels and activity.

Earnings Call Highlights

General Market

The CNN “Fear and Greed Index” ticked up to 28 this week from 14 last week. You can learn how this indicator is calculated and how it works here: (Video Explanation)

The NAAIM (National Association of Active Investment Managers Index) (Video Explanation) fell to 68.36% equity exposure this week from last week’s 68.52%.

Our podcast|videocast will be out sometime today. We have a lot of great data to cover this week.  Each week, we have a segment called “Ask Me Anything (AMA)” where we answer questions sent in by our audience. If you have a question for this week’s episode, please send it in at the contact form here.

Congratulations to all of the new clients that came in intra-quarter (Q1) with larger sized accounts, and to those existing clients who upsized their contributions to their accounts.

We are officially open to smaller accounts $1M+. The opening will close on April 10th at 5PM Eastern.

To see if you qualify and to take advantage of this opening click here, or go to GreatHillCapital.com for more details.

Larger accounts $5-10M+ can access bespoke service anytime here.

Not a solicitation.

*Opinion, Not Advice. See Terms

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Bullish Percent Consumer Discretionary

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Thanks to Phil Serafino for including me in his article on Bloomberg. You can find it here:

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CBOE Index Put/Call Ratio

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The column under the date 4/6/2026 has a letter that represents the movement in 2026 earnings estimates since the most recent print (2/5/2026). “U” means 2026 estimates are UP in the last 60 days. “D” means 2026 estimates are DOWN in the last 60 days. “S” means 2026 estimates have remained the SAME in the last 60 days. The column entitled “1yr Target Est” is the Wall Street consensus 12 month price target for each stock.

What this table is telling us is that estimates are UP. More estimates came UP for 2026 in the past 60 days than went DOWN – The Up:Down ratio was 18:9. The rest remained the same.

The cumulative 2026 earnings power of these 30 stocks was revised UP by +0.59% in the past 60 days. 2027 earnings went UP +0.71%.

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The column under the date 4/6/2026 has a letter that represents the movement in 2026 earnings estimates since the most recent print (2/5/2026). “U” means 2026 estimates are UP in the last 60 days. “D” means 2026 estimates are DOWN in the last 60 days. “S” means 2026 estimates have remained the SAME in the last 60 days. The column entitled “1yr Target Est” is the Wall Street consensus 12 month price target for each stock.

What this table is telling us is that estimates are UP. More estimates came UP for 2026 in the past 60 days than went DOWN – The Up:Down ratio was 19:7. The rest remained the same.

The cumulative 2026 earnings power of these 30 stocks was revised UP by +8.80% in the past 60 days. 2027 earnings went UP +16.94%.

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NYSE – Moving Balance Indicator

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S&P Small Cap Stocks Above 200 Day Moving Average

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Nasdaq Moving Balance Indicator

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Article referenced in VideoCast above:

“Back on the Menu” Stock Market (and Sentiment Results)…

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Article referenced in Podcast above:

“Back on the Menu” Stock Market (and Sentiment Results)…

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Dow Percent on PMO Crossover BUY Signals

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Nasdaq Intermediate Term Volume Momentum Oscillator

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On Friday, I joined Liz Claman on Fox Business’ The Claman Countdown to discuss markets, the economy, Iran, energy, and a lot more. Thanks to Liz and Brooke Haliscak for having me on:

On Wednesday, I joined Stuart Varney on Fox Business’ Varney & Co. to discuss markets, the economy, Iran, oil, Pfizer ($PFE), and a lot more. Thanks to Stuart and Maggie Edwards for having me on:

On Friday, I joined Brian Sozzi on Yahoo! Finance to discuss markets, the economy, Iran, energy, earnings, and a lot more. Thanks to Brian and Justin Oliver for having me on:

 Long Live the Consumer

When everyone is running away from the consumer, that’s exactly when you want to be moving toward it.

Consumer sentiment was already in the gutter heading into the Iran conflict, and recent weeks have only accelerated the mass exodus out of anything consumer-related, serving up a silver platter of opportunities to add exposure to some of our favorite beaten-down names, whether it’s the VF Corps, the Disneys, or the Papa John’s of the world.

Fund managers are completely offside and have reached peak pessimism toward the sector, with allocations falling back to October 2022 lows. Meanwhile, consumer sentiment has fallen toward extreme lows not seen outside of the 2022 inflation shock, COVID, the European debt crisis, the GFC, the Gulf War, and the stagflation of the 1980s.

If there’s one thing history has proven time and time again, it’s that these pockets of dislocation are where the best buying opportunities are born. The pessimists always sound smart in the short term, but it’s the optimists who make the money over the long run. At these washed-out extremes, either sentiment is right and the world falls apart, or it isn’t and things get better. And if the world really does end, we have far bigger problems than our stocks.

With that in mind, these are the levels where you want to be a buyer, and consumer names often offer the biggest bang for your buck as things resolve.

That brings us to one of our favorite beaten-down names in the restaurant space, Papa John’s:

PZZA Update

For newer readers, here’s a quick overview of the key drivers behind our thesis on Papa John’s:

We laid out the full thesis in detail in the article linked below:

“Turnaround on the Menu” Stock Market (and Sentiment Results)…

While Papa John’s Q4 headline numbers weren’t anything to write home about, with top-line revenue of $498M falling short and North America comps down 5.4%, look under the surface and you see a management team pulling all the right levers and executing exactly as promised: ripping off the band-aid, cleaning up operations, and returning the brand to what made it great. That’s exactly what we signed up for, and that’s exactly what the quarter put on display.

Of course, the earnings report was quickly put on the back burner following reports of a second lowball offer to take the business private, this time at $47/share from Irth Capital, coming on the heels of the $64/share bid from Irth and Apollo in late 2025. Noise around a potential takeout is nothing new for PZZA, and we view this offer the same way we have every in-the-hole bid for early-stage turnaround names we’ve held, whether it was GXO in 2024, Canada Goose in August 2025, or the more recent rumors around PayPal. We didn’t get involved in any of these names to make a quick buck, and we have no interest in selling at the very start of a turnaround. In the case of PZZA, accepting a deal at these levels would be highway robbery of all the upside ahead.

As management said the last time this came up, the greatest opportunity to create value is through executing the turnaround plan. We couldn’t agree more. What we’re betting on is a back-to-basics turnaround led by a proven QSR operator in Todd Penegor, and the early signs that the playbook is working are already showing up.

The name of the game with the PZZA turnaround is restoring what made the brand great and refocusing on core pizza. That starts with fixing North America by taking a page out of the same playbook that successfully turned International around, a business that has now delivered five straight quarters of positive comps and +5% comps in FY25. To get there, management is cleaning up the restaurant footprint by targeting ~300 underperforming North America locations for closure by the end of 2027, many of which were operating at negative 4-wall EBITDA, while simultaneously taking out over $85M in combined supply chain and G&A costs and targeting ~200 bps of 4-wall EBITDA margin expansion by FY2028 for the remaining fleet.

And while all that heavy lifting gets done, the biggest driver of the turnaround is returning focus to the product, the innovation pipeline, and restoring the marketing strategy that built the brand. Green shoots are already showing up across all three: pizza sales were up 4% in FY25, new launches like Pan Pizza are outperforming expectations nationwide, and 50 co-ops are now back up and running, covering the majority of North America systemwide sales and priority markets, replacing the flawed national marketing strategy that prior management had pivoted to.

This is as blocking-and-tackling of a turnaround as they come. No groundbreaking innovation needed, just great pizza and operational discipline. For a proven QSR operator like Todd Penegor, who delivered a 3x bagger at Wendy’s, we have no doubt he gets this done.

While it’s still early innings and it will take time to fully play out, we get paid handsomely to wait with a 5.7% dividend yield backed by recovering FCF that nearly doubled year over year and a solid balance sheet with no major maturities until 2029. Zoom out, have some patience, and let this turnaround play out. As sentiment around the consumer rebounds and people remember that Americans still love pizza, expect Papa John’s to come back into favor and Irth Capital to switch that $47 around to a $74 in short order.

Q4 Earnings Breakdown

10 Key Points

1) Q4 revenue came in at $498.2M (-6.1% Y/Y), missing consensus of $517M, with the decline primarily driven by a ~$24M drop at domestic company-owned restaurants, ~$9M of which is directly attributable to the re-franchising of 85 restaurants. FY25 revenue was $2.1B, flat Y/Y. Q4 adjusted EPS of $0.34 beat consensus of $0.33, with FY25 adjusted EPS of $1.43 vs. $2.34 in the prior year.

2) North America Q4 comp sales came in at -5.4% Y/Y, below consensus of -4.3%, against a weak consumer backdrop and elevated promotional environment. FY25 NA comps finished at -2.5%. Q4 NA systemwide sales decreased 4.5% to $886M, with FY25 systemwide sales -1.0% to $3.6B.

3) International remains the clear bright spot, with Q4 comps +5.9% Y/Y, marking five consecutive quarters of positive comp sales with strength broad-based across markets. FY25 international comps finished at +5.0%. Q4 international systemwide sales increased 8.1% to $341M, with FY25 systemwide sales +7.7% to $1.3B.

4) Management continues to execute on right-sizing the cost structure, expanding the supply chain savings target from $50M to $60M by FY28 and identifying at least $25M in noncustomer-facing corporate cost savings through 2027, with ~$13M expected to be realized in 2026 and corporate headcount already reduced by ~7%. Management also announced the identification of ~300 underperforming NA locations for closure by end of 2027, with ~200 closures expected in 2026. These restaurants generate AUVs below $600K vs. the top 50% fleet average of ~$1.4M and are mostly operating at negative 4-wall EBITDA, with closures expected to drive at least a ~3% increase in average AUVs systemwide. This is the same playbook used to turn around the UK market, where post-closure AUVs improved ~17% and the market just posted ~7% comp growth in Q4.

5) Q4 adjusted EBITDA came in at $51.1M (-11.7% Y/Y), with FY25 adjusted EBITDA of $201.1M (-11.5% Y/Y). The decline was driven primarily by ~$21M in stepped-up marketing spend as management re-established co-ops across 50 markets representing the majority of NA systemwide sales, restoring the local marketing strategy that built the brand and was eliminated by prior management. Domestic company-owned restaurant 4-wall EBITDA margin came in at 12.7% in Q4, an improvement of 60 bps driven by lower cost of sales. Management sees a clear path to ~200 bps of 4-wall margin improvement over the medium term, with ~160 bps from supply chain savings and the balance from labor and market efficiencies.

6) Management is eliminating menu complexity by ending Papadias and Papa Bites by Q2, a ~150 bps near-term comp headwind but the right long-term decision as focus returns to core pizza. Encouragingly, PZZA sold 4% more pizzas in FY25 than the prior year even amid mix trade-downs. On the innovation front, the new Pan Pizza platform launched in late January and is already outperforming expectations nationwide, with plans to expand into several priority international markets in the coming months. PZZA is also piloting a new protein pizza crust with 55+ grams of protein per serving, a first in the industry, and is rolling out new oven toasted sandwiches across North America, both already receiving highly positive customer feedback.

7) Progress on the digital front continues, with Papa Rewards loyalty members now totaling ~41M, Papa Dough redemptions more than doubling from 24% to 48% of loyalty orders, and loyalty members placing 2.5x more orders than non-rewards members during the year. The new app experience is delivering strong early results, with response times ~40% faster and conversion improved 70 bps vs. legacy platforms. Management also continues to expand its partnership with Google Cloud, developing AI-powered tools aimed at simplifying the ordering experience and reducing cart abandonment.

8) PZZA is accelerating the re-franchising program, with 85 domestic company-owned restaurants re-franchised during the year and negotiations currently underway to re-franchise an additional 29 restaurants in the Southeast, expected to close in Q2. Management remains committed to reducing company-owned restaurants to a mid-single-digit percentage of the NA system, with additional re-franchising transactions planned for 2026, though not yet factored into guidance.

9) FY25 free cash flow came in at $61.3M, nearly double the $34.1M in FY24, driven by working capital improvements and timing of National Marketing Fund cash payments. Management expects continued improvement in free cash flow as the business pivots toward a more asset-light model after 2026, with capex expected to step down to $60M to $70M per year on average vs. $70M to $80M expected in FY26.

10) FY26 guidance calls for global systemwide sales flat to a low single-digit decline, with NA comps of -2% to -4% and international comps of +2% to +4%. Management expects Q1 to be the softest quarter of the year for NA, with quarter-to-date comps down mid-single digits, followed by improving trends in the back half supported by product innovation and marketing co-ops. Adjusted EBITDA is expected to land at $200M to $210M for the full year, which includes ~$22M in supplemental marketing and franchisee subsidies not expected to continue beyond FY26, making the underlying run-rate EBITDA power of the business meaningfully higher than the headline figure suggests. 40 to 50 gross new NA openings and 180 to 220 international openings are expected for the year.

Earnings Call Highlights

Crown Castle Update

For newer readers, here’s a quick overview of the key drivers behind our thesis on Crown Castle, the only pure-play U.S. tower REIT and a high-yield income name that becomes increasingly hard to ignore as rates come down and capital rotates back into yield:

Q4 Earnings Breakdown

10 Key Points

1) Q4 site rental revenue came in at $1.02B, with full-year site rental revenue of $4.05B exceeding the midpoint of prior guidance by $19M. Q4 adjusted EBITDA came in at $781M, with the full-year figure of $2.86B exceeding the midpoint by $28M. Q4 AFFO came in at $489M or $1.12 per share, with full-year AFFO of $1.90B or $4.36 per share exceeding the midpoint by $34M. Outperformance across all three metrics was driven by higher-than-expected services contribution, ongoing efficiency initiatives, and lower interest expense, with CCI finishing near or above the high end of guidance across all key metrics.

2) The $8.5B sale of the small cell and fiber solutions business remains on track to close in 1H 2026, with the DOJ having closed its Hart-Scott-Rodino review without requiring any action, leaving only a handful of state and federal approvals remaining. Proceeds will be used to repay ~$7B of debt and fund ~$1B in share repurchases, with the debt paydown expected to reduce annual interest expense by ~$120M. Upon close, CCI will become the only publicly traded pure-play tower company focused exclusively on the US market, with ~60% of the consolidated workforce moving with the sale.

3) Following DISH’s (EchoStar) default on its payment obligations in January, CCI exercised its right to terminate the agreement and is now seeking to recover in excess of $3.5B in remaining payments owed through 2036 via legal action. DISH accounted for ~5% of CCI’s leasing revenue in 2025, or ~$220M, and management continues to expect full payment under the terms of the contract. The termination creates a $220M site rental headwind in FY26, with the 2026 outlook excluding any potential contractual offsetting payments from DISH. Management is pursuing recovery through every legal and regulatory channel available, though the court process could take a year or longer to resolve.

4) In response to the DISH default, management accelerated and expanded its restructuring plan, reducing the tower and corporate workforce in continuing operations by ~20%, or ~1,250 full-time employees. Combined with other cost reductions, the plan is expected to deliver $65M in annualized operating cost savings, with ~$55M realized in FY26 and an incremental $10M in 2027 due to the timing of non-labor reductions being phased in following the fiber sale close.

5) Full-year 2025 organic growth came in at 4.9% excluding the impact of Sprint churn, driven by 3% growth in core leasing activity and 2.5% from escalators. The $204M Sprint churn headwind is now largely behind the company, with management viewing FY26 as the trough year for organic growth at 3.5% ex-DISH and ex-Sprint cancellations, and expecting improvement thereafter.

6) CCI expects 2026 discretionary capex to land between $150M and $250M, a dramatic step down from prior years given the removal of the capital-intensive fiber business. Management is also selectively exploring ground lease buyout opportunities but will remain highly disciplined, focusing only on towers with a minimum of two committed customers where return profiles are clearly attractive.

7) Management remains focused on maintaining an investment-grade balance sheet, ending the year with 84% of debt fixed, a weighted average debt maturity of ~6 years, and ~$4.1B of available liquidity under the revolving credit facility. Post fiber sale, leverage is expected to decline to a targeted 6x to 6.5x as ~$7B of debt is repaid, reducing annual interest expense by ~$120M.

8) CCI remains committed to maintaining the annualized dividend at $4.25 per share (current yield of ~5.3%), with a targeted payout ratio of 75-80% of AFFO and the dividend expected to grow in line with AFFO growth thereafter.

9) The long-term industry backdrop remains highly attractive, with tailwinds including AT&T’s recently announced $250B five-year infrastructure spending plan, continued healthy mobile data usage growth, and the FCC’s planned auction of at least 800 megahertz of spectrum beginning in 2027. Management expects leasing activity to accelerate meaningfully beyond FY26 as new spectrum bands are deployed and network investment ramps.

10) FY26 guidance calls for site rental revenues of $3.85B (-4.9% Y/Y), adjusted EBITDA of $2.69B (-6% Y/Y), and AFFO of $4.43 per share (+2% Y/Y) at the midpoint. The headline declines are entirely driven by the $220M DISH termination and $20M in remaining Sprint cancellations, which together mask healthy underlying core leasing growth of +3.5% ex-churn. Importantly, AFFO still grows despite the $240M headwind, driven by opex savings and lower interest expense. Management views FY26 as the trough year, with organic growth expected to accelerate thereafter.

Earnings Call Highlights

Morningstar Analyst Note

General Market

The CNN “Fear and Greed Index” ticked down to 14 this week from 18 last week. You can learn how this indicator is calculated and how it works here: (Video Explanation)

The NAAIM (National Association of Active Investment Managers Index) (Video Explanation) jumped to 68.52% equity exposure this week from last week’s 60.24%.

Our podcast|videocast will be out sometime today. We have a lot of great data to cover this week.  Each week, we have a segment called “Ask Me Anything (AMA)” where we answer questions sent in by our audience. If you have a question for this week’s episode, please send it in at the contact form here.

Congratulations to all of the new clients that came in intra-quarter (Q1) with larger sized accounts, and to those existing clients who upsized their contributions to their accounts.

We are officially open to smaller accounts $1M+. The opening will close on April 10th at 5PM Eastern.

To see if you qualify and to take advantage of this opening click here, or go to GreatHillCapital.com for more details.

Larger accounts $5-10M+ can access bespoke service anytime here.

Not a solicitation.

*Opinion, Not Advice. See Terms

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S&P Consumer Staples Stocks Above 20 EMA

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Total Market Advances Minus Declines

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